Profits of Japanese Banks and Market Valuations -- Comparison between Net Income and Comprehensive Income --

Yuji Yamashita and Toshiyuki Sakiyama
Additional contact information
Yuji Yamashita: Bank of Japan
Toshiyuki Sakiyama: Bank of Japan

No 11-E-5, Bank of Japan Review Series from Bank of Japan

Abstract: From fiscal 2010, Japan's listed companies are obliged to disclose Comprehensive Income (CI). In Japan, CI is disclosed in Statements of Comprehensive Income, which are attracting considerable attention. In the United States, Other Comprehensive Income, including gains/losses on Available-for-Sale securities, is said to have become a focus of attention since 1998, when CI was introduced. Therefore, the perspective of financial markets in valuing Japanese financial institutions is likely to change to attach more importance to CI. CI of Japanese banks is more volatile than Net Income by far, reflecting the significant price volatility in equities held. Thus, once financial markets start to pay more attention to CI, the risk recognition of Japanese banks' profits can heighten. This can affect Japanese banks in terms of funding costs and so on. In this situation, Japanese banks are required to evaluate more prudently the balance between risks and returns in holding equities, and to make efforts to reduce risks when judged as being excessive.

Date: 2011-10-04
References: Add references at CitEc
Citations:

Downloads: (external link)
http://www.boj.or.jp/en/research/wps_rev/rev_2011/data/rev11e05.pdf (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:boj:bojrev:11-e-5

Access Statistics for this paper

More papers in Bank of Japan Review Series from Bank of Japan Contact information at EDIRC.
Bibliographic data for series maintained by Bank of Japan ().